Gold price advances while economy slows

Prolonged debt in Greece has spurred demand for gold as an investment.

Gold prices may advance for a second day to near a one-month high as data pointing to an economic slowdown and prolonged debt turmoil in Greece spurred demand for the metal as a store of value, reports Bloomberg.

Gold bullion for immediate-delivery has risen by 0.2 percent to $1,543.55 (£943) an ounce. The metal reached $1,550.20 (£946) an ounce yesterday, the highest level since May 3. Cash silver strengthened as much as 1.2 percent to $37.295 an ounce.

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Manufacturing growth from China to the euro region and the U.S. slowed last month, adding to signs momentum is weakening in the global economy. The Institute for Supply Management’s factory index fell more than projected to 53.5 last month, the lowest level since September 2009, U.S. data showed yesterday.

Mark Pervan, head of commodity research with ANZ Banking Group Ltd said: "Investors bought the safe-haven asset", having seen economic slowdown in the U.S. Continued central-bank purchases of bullion also provided "additional support and positive sentiment for gold."

Russia and Mexico in April added gold now valued at almost $1 billion (£611m) to their reserves. Russia bought 13.72 metric tons in the month, raising holdings to 824.83 tons, according to data on the International Monetary Fund’s website. Mexico’s assets rose 5.93 tons to 106.14 tons, the data showed this week.

Greece’s risk of default was raised to 50 percent by Moody’s Investors Service as European officials rushed to put together the second bailout plan in two years to stave off renewed financial turmoil in the region.

Moody’s downgraded Greece, putting it on a par with Cuba, according to a report published late yesterday. The move came after policy makers considered asking investors to reinvest in new Greek debt when existing bonds mature.

"Slowing growth and increased uncertainty over the outlook ahead may keep gold supported," said Ong Yi Ling, a Singapore- based analyst with Phillip Futures Pte.